Venture capital firm Avaana Capital, which manages the Avaana Climate and Sustainability Fund, is planning cash flow soon, according to founding partner Anjali Bansal.
Although it is a high volatility fund, it has seen positive performance across all portfolio companies, she explains. activity area. She, however, declined to share financial details. Edited excerpts from an interview:
What is the fund’s main investment strategy?
The fund screens 800 to 1,000 startups each year, looking for opportunities where a significant climate problem matches a significant market opportunity. In addition, start-ups are evaluated on four parameters: technological innovation or differentiated economic model; resolve an important problem or market; potential to create a significant business; and the right founding team with expertise.
What are the priority sectors for climate technology?
We focus on the energy transition (renewable energy, energy storage, green hydrogen), mobility and supply chains (electric mobility, circular economy) and agriculture (climate resilient agriculture, precision agriculture).
Could you share an overview of your current portfolio?
We have made almost 15 investments, including funds like Kazam, eekifoods, FarMart, Praan and Aerem. They typically take a significant stake of 8 to 15 percent in portfolio companies. Meanwhile, the first check is in the range of $1-3 million, while a portion is kept in reserve capital for follow-on rounds in successful companies. The fund generally targets 5 to 6 new deals per year.
What is the exit strategy for your portfolio companies?
Since our fund is still young, we expect to see liquidity soon. The exit strategy will be a mix of secondary sales, mergers and acquisitions and, for the best performers, long-term initial public offerings (IPOs). IPOs typically materialize within 7-10 years from early stage investments.
What is the status of Avaana Capital’s Fund 2 fundraising?
We have completed the first close of the second fund and are targeting a total fund size of ₹1,000 crore. The fund focuses on mitigation, adaptation and resilience in key areas, namely energy transition, mobility and supply chain, and climate resilient agriculture. Final closing is expected by the second half of 2024.
How do you perceive the current environment for start-up financing?
The financing environment has slowed globally, with the focus shifting to profitability and unit economics. Even if the start-up phase remains active, valuation corrections are observed at the growth stage. In climate technology, traditional sectors like renewable energy attract capital, but investor education is crucial for new areas of innovation.
